USDT – Tether Explained

guys thanks for tuning in to another episode of nuggets news in tonight’s video I just want to discuss the u.s. dollar tether and it’s been the subject of debate a couple of times over the years so I just want to jump into exactly what it is and how it came about so the US dollar tether is basically a crypto currency of its own and one tether or one token represents one US dollar in value and that’s pegged to the reserves the tether company have in their bank accounts so that’s been the subject of a bit of debate and I’ll talk about that towards the end of the presentation so 319 million tether on issue at the moment they came about because a lot of exchanges were having issues dealing with US dollars and anytime you go in and out of US Dollars it opens up a big can of worms to do with compliance issues legal issues know your customer anti-money laundering policies and for that reason a lot of exchanges will just sit there customers funds in u.s. dollar tether and price their coins in the USD t so over the years we have seen banks have issues with their sorry exchanges have issues with their banking partners and last year Wells Fargo and big Phoenix had a lot of issues with deposits and withdrawals and for that reason there was concern about the liquidity of the tethered token being able to actually exchange it to and from their bank account to give it value and for that reason we saw the the tether lose its $1 pegging and drop down into the 90s as people were sewn to pricing the risk of whether or not you would be able to actually redeem you your tethers and if they still had value so this is from the tether website here they’re aiming to be a stable currency a hundred percent backed transport transparent with their audit process build on the Bitcoin blockchain via the Omni layer protocol so it is nice and secure being on a blockchain and widespread integration as we have seen a lot of adoption now from users and exchanges alike now this is from their wallet page and what it shows here is the assets and liabilities so tether on issue and that the debates been around whether or not they do have that 319 in their bank account with their banking partners so that if there’s ever a liquidity crunch and everyone rushes to sell or exchanges need to sell a lot of tether are they going to be able to pay customers out and is that process gonna be nice and fluent or our banks gonna create issues again and putting those deposits and withdrawals on hold so because of those laws that I that I’ve mentioned so here’s another website you can if you ever need to check out the Omni chest on info which gives a real-time report of the number of tether tokens that are actually on issue at a given point in time so here’s the article I want to jump into today from coin Telegraph so this is the part that’s of worrying for a lot of users from the legal section of the tether website so once you have tethers you can trade them keep them or use them to pay people but tethers are not money and are not monetary instruments so there’s no contractual right or other legal right or legal claim against us to redeem or exchange your tethers for money we do not guarantee any right of redemption or exchange of these tethers buyers for money there is no guarantee against losses when you buy trade sell or redeem tethers so it kind of goes against the grain of what they’ve said they’re trying to be as I’ve just mentioned being a stable currency 100 percent back transparent secure and then going out to say that legally you know they don’t have to redeem these so mixed messages there and hopefully they clear that up very soon but here’s a post from BitFenix drew from reddit where he’s saying be phoenix does not own tether obviously the two have a close relationship they don’t own tell it’s a sister company with a minority percentage of overlap and questioning the banking issues he’s saying institutional customers are regularly moving hundreds of thousands of even millions of dollars in and out of fear to and from the BitFenix exchange to the tether bank accounts so he’s saying that the audit will be complete this year it’s currently under that coming soon status which is what’s worrying people when he’s put out the bit to anyone that wants to take it 5 bitcoin that the tethers or the process will be in fact completed this year and that’s gonna relieve a lot of nerves I think for the people that are worried whether or not this is a hundred percent backed and if they can afford to pay everyone out if everyone decides to sell their tether so that lack of transparency is a bit of the issue and people just trying to get their head around exactly how this all works and how it’s come about and I don’t think this is a case of funny money I don’t think that continually issued tethers without having them backed okay it’ll be one of the greatest scams of all time if they indeed shown to be insolvent so not a conspiracy theory I think these are healthy concerns by people that understand how it works and obviously last year when they they had the banking issues only 66 million were on issue and since then we’re up to nearly 320 million so I don’t think there’s any way that you can do that sort of money and just sweep it under the rug and hire the K I think this is a legitimate company that I believe our hundred percent backed so finally I just want to touch on another point that’s really important so we’re arguing whether or not they’re a hundred percent back now lots of people that have got into cryptocurrency understand without how banks can do fractional reserve banking so if you lend a bank hundred dollars reserve requirements or ratios change from bank to bank but they typically hover around ten or twenty percent depending on what country you’re in so if you deposit a hundred dollars to a bank the bank is only actually required to keep ten dollars okay now this opens up a lot of issues and that’s why central banks and bankers fear bank runs so if ten people with $1,000 all go to a bank in theory they should have $10,000 in case all the customers once a we draw their money at once okay and this is the issue here being a hundred percent back now in the real world banks aren’t required to keep a hundred percent so if those 10 people that deposited a thousand dollars all go to the bank to redraw that money the bank may only have a thousand dollars in reserves so ten percent so only one of those people get can get pay and the other nine don’t so this this just dives into a greater debate talk about the hours and a lot of you guys will be aware of this if you’ve got into cryptocurrency about how the financial system is is only fractionally backed and they allow to lend out it only keeping a minority in their reserve requirements so the fact that we’re debating whether or not this is a hundred percent backed in the real world banks only keep ten percent okay I’m not saying they should only keep ten percent tethers should be a hundred percent backed but I just want people to be aware of this issue and why we see bank runs in and and banks go into meltdown because once customers start to withdraw deposits okay they can very quickly empty the balance sheet of banks so a great topic and I’m great I love seeing you guys dive into these issues and to have a deep understanding of these issues is really important as we further our crypto journey and this is going to become a a big part of the crypto world in the future if we continue to grow okay there’s going to be more and more tethers on issues so as always guys please give this video a like if you’ve enjoyed it share these videos around subscribe if you haven’t already and as always thanks for tuning in Cheers

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